Dairy prices rise for fourth straight auction

Dairy product prices increased at the Global Dairy Trade auction, gaining for the eighth time in nine auctions, amid expectations for decreasing supply.

The GDT price index rose 3.5 percent to US$3,622, up from US$3,519 at the previous auction three weeks ago. Some 22,472 tonnes of product was sold, down from 23,902 tonnes at the previous auction.

Whole milk powder climbed 4.9 percent to US$3,593 a tonne, well ahead of the US$3000 many farmers budget on to make a profit.

Prices have now risen in eight of the past nine auctions and are more than double their July 2015 low (see graph below).

"The lifts in dairy commodity prices ... were closely aligned with market expectations," AgriHQ dairy analyst Susan Kilsby says.

The price differential between whole milk powder and skim milk powder continues to widen, Kilsby notes.

"This is likely to encourage more milk to be diverted into WMP production although the low priced SMP is partially offset by the strength of the milkfat products which continue to trade well across the globe," according to Kilsby.

At the latest GDT auction, lactose rallied 10.6 percent to US$873 a tonne, while anhydrous milk fat rose 2.9 percent to US$5,500 a tonne.

Rennet casein gained 2.3 percent to US$6,201 a tonne, while cheddar added 2.2 percent to US$3,752 a tonne.

Butter rose 1.7 percent to US$4,262 a tonne, and skim milk powder advanced 1.4 percent to US$2,570 a tonne.

"Skim milk powder price lifts are curbed by the large volumes ... in storage," Kilsby noted. "The EU is now releasing some of the older product is has stored which doesn't directly impact the current market for fresh product but it does imply that the European Commission is likely to release additional product next year so long as prices remain firm."

Click to zoom. Source: GlobalDairyTrade.info

Bucking the trend, butter milk powder fell 2.6 percent to US$2,408 a tonne.

The New Zealand dollar last traded at 71.10 US cents at about 12.09pm in New York, compared with 71.41 US cents at 5pm in Wellington the previous day.

There were 109 winning bidders out of 159 participating at the 13-round auction. The number of qualified bidders rose to 516, up from 510 at the previous auction.

(BusinessDesk)